Section 1. K.S.A. 2000 Supp.
50-6a02 is hereby amended to read as
follows: 50-6a02. As used in this act:

(a) ``Adjusted for inflation'' means
increased in accordance with the
formula for inflation adjustment set forth in exhibit C to the
master set-
tlement agreement.

(b) ``Affiliate'' means a person who
directly or indirectly owns or con-
trols, is owned or controlled by, or is under common ownership or
control
with, another person. Solely for purposes of this definition, the
terms
``owns,'' ``is owned'' and ``ownership'' mean ownership of an
equity inter-
est, or the equivalent thereof, of 10% or more, and the term
``person''
means an individual, partnership, committee, association,
corporation or
any other organization or group of persons.

(c) ``Allocable share'' means allocable
share as that term is defined in
the master settlement agreement.

(d) ``Cigarette'' means any product that
contains nicotine, is intended
to be burned or heated under ordinary conditions of use and
consists of
or contains (1) any roll of tobacco wrapped in paper or in any
substance
not containing tobacco; or (2) tobacco, in any form, that is
functional in
the product, which, because of its appearance, the type of tobacco
used
in the filler, or its packaging and labeling, is likely to be
offered to, or
purchased by, consumers as a cigarette; or (3) any roll of tobacco
wrapped
in any substance containing tobacco which, because of its
appearance, the
type of tobacco used in the filler, or its packaging and labeling,
is likely
to be offered to, or purchased by, consumers as a cigarette
described in
clause (1) of this subsection (d). The term ``cigarette'' includes
``roll-your-
own'' (i.e., any tobacco which, because of its appearance, type,
packaging
or labeling is suitable for use and likely to be offered to, or
purchased by,
consumers as tobacco for making cigarettes). For purposes of this
defi-
nition of ``cigarette,'' 0.09 ounces of ``roll-your-own'' tobacco
shall con-
stitute one individual ``cigarette.''

(e) ``Master settlement agreement'' means
the settlement agreement
(and related documents) entered into on November 23, 1998, by the
state
and leading United States tobacco product manufacturers.

(f) ``Qualified escrow fund'' means an
escrow arrangement with a
federally or state chartered financial institution having no
affiliation
with any tobacco product manufacturer and having assets of at
least
$1,000,000,000 where such arrangement requires that such
financial
institution hold the escrowed funds' principal for the benefit of
releas-
ing parties and prohibits the tobacco product manufacturer placing
the
funds into escrow from using, accessing or directing the use of
the
funds' principal except as consistent with subsection (b)(2) of
K.S.A.
2000 Supp. 50-6a03 and amendments thereto.

(g) ``Released claims'' means released
claims as that term is defined
in the master settlement agreement.

(h) ``Releasing parties'' means releasing
parties as that term is defined
in the master settlement agreement.

(i) ``Tobacco product manufacturer''
means an entity that after the
date of enactment of this act directly (and not exclusively through
any
affiliate):

(1) Manufactures cigarettes anywhere that
such manufacturer in-
tends to be sold in the United States, including cigarettes
intended to be
sold in the United States through an importer (except where
such im-
porter is an original participating manufacturer, as that term is
defined
in the master settlement agreement, that will be responsible for
the pay-
ments under the master settlement agreement with respect to such
cig-
arettes as a result of the provisions of subsections II(mm) of the
master
settlement agreement and that pays the taxes specified in
subsection II(z)
of the master settlement agreement, and provided that the
manufacturer
of such cigarettes does not market or advertise such cigarettes in
the
United States);

(2) is the first purchaser anywhere for
resale in the United States of
cigarettes manufactured anywhere that the manufacturer does not
intend
to be sold in the United States; or

(3) becomes a successor of an entity
described in paragraph (1) or
(2). The term ``tobacco product manufacturer'' shall not include an
affil-
iate of a tobacco product manufacturer unless such affiliate itself
falls
within any of parts (1)-(3) of subsection (i) above.

(j) ``Units sold'' means the number of
individual cigarettes sold in the
state by the applicable tobacco product manufacturer (whether
directly
or through a distributor, retailer or similar intermediary or
intermediar-
ies) during the year in question, as measured by excise taxes
collected by
the state on packs (or ``roll-your-own'' tobacco containers)
bearing the
excise tax stamp of the state. The department of revenue shall
promulgate
such rules and regulations as are necessary to ascertain the amount
of
state excise tax paid on the cigarettes of such tobacco product
manufac-
turer for each year.

Sec. 2. K.S.A. 2000 Supp. 50-6a03
is hereby amended to read as
follows: 50-6a03. Any tobacco product manufacturer selling
cigarettes to
consumers within the state (whether directly or through a
distributor,
retailer or similar intermediary or intermediaries) after the
effective date
of this act shall do one of the following:

(a) Become a participating manufacturer
(as that term is defined in
section II(jj) of the master settlement agreement) and generally
perform
its financial obligations under the master settlement agreement;
or

(b) (1) place into a qualified
escrow fund by April 15 of the year
following the year in question the following amounts (as such
amounts
are adjusted for inflation):

(A) 1999: $.0094241 per unit sold after
the effective date of this act;

(B) 2000: $.0104712 per unit sold;

(C) for each of 2001 and 2002: $.0136125
per unit sold;

(D) for each of 2003 through 2006:
$.0167539 per unit sold;

(E) for each of 2007 and each year
thereafter: $0188482$.0188482
per unit sold.

(2) A tobacco product manufacturer that
places funds into escrow
pursuant to paragraph (1) of subsection (b) shall receive the
interest or
other appreciation on such funds as earned. Such funds themselves
shall
be released from escrow only under the following circumstances:

(A) To pay a judgment or settlement on
any released claim brought
against such tobacco product manufacturer by the state or any
releasing
party located or residing in the state. Funds shall be released
from escrow
under this subparagraph (i) in the order in which they were placed
into
escrow and (ii) only to the extent and at the time necessary to
make
payments required under such judgment or settlement;

(B) to the extent that a tobacco product
manufacturer establishes that
the amount it was required to place into escrow in a particular
year was
greater than the state's allocable share of the total payments that
such
manufacturer would have been required to make in that year under
the
master settlement agreement (as determined pursuant to section
IX(i)(2)
of the master settlement agreement, and before any of the
adjustments
or offsets described in section IX(i)(3) of that agreement other
than the
inflation adjustment) had it been a participating manufacturer, the
excess
shall be released from escrow and revert back to such tobacco
product
manufacturer; or

(C) to the extent not released from
escrow under subparagraphs (A)
or (B) of paragraph (2) of subsection (b), funds shall be released
from
escrow and revert back to such tobacco product manufacturer 25
years
after the date on which they were placed into escrow.

(3) Each tobacco product manufacturer
that elects to place funds into
escrow pursuant to this subsection shall annually certify to the
attorney
general that it is in compliance with this subsection. The attorney
general
may bring a civil action on behalf of the state against any tobacco
product
manufacturer that fails to place into escrow the funds required
under this
section. Any tobacco product manufacturer that fails in any year to
place
into escrow the funds required under this section shall:

(A) Be required within 15 days to place
such funds into escrow as
shall bring it into compliance with this section. The court, upon a
finding
of a violation of this subsection, may impose a civil penalty to be
credited
to the state general fund in an amount not to exceed 5% of the
amount
improperly withheld from escrow per day of the violation and in a
total
amount not to exceed 100% of the original amount improperly
withheld
from escrow;

(B) in the case of a knowing violation,
be required within 15 days to
place such funds into escrow as shall bring it into compliance with
this
section. The court, upon a finding of a knowing violation of this
subsec-
tion, may impose a civil penalty to be paid to the state general
fund in an
amount not to exceed 15% of the amount improperly withheld from
es-
crow per day of the violation and in a total amount not to exceed
300%
of the original amount improperly withheld from escrow; and

(C) in the case of a second knowing
violation, be prohibited from
selling cigarettes to consumers within the state (whether directly
or
through a distributor, retailer or similar intermediary) for a
period not to
exceed two years.

Each failure to make an annual deposit
required under this section
shall constitute a separate violation. A tobacco product
manufacturer who
is found in violation of this section shall pay, in addition to
other amounts
assessed under this section and pursuant to law, the costs and
attorney's
fees incurred by the state during a successful presentation under
this
paragraph (3).

Sec. 3. K.S.A. 2000 Supp. 50-6a02 and 50-6a03 are
hereby repealed.
Sec. 4. This act shall take effect and be in force
from and after its
publication in the Kansas register.

Approved March 15, 2001.
Published in the Kansas Register March 22, 2001.